In a dramatic shift in U.S. foreign policy, last week the U.S. withdrew its forces from northern Syria, paving the way for a Turkish offensive against the “Syrian Democratic Forces”. This offensive has attracted international condemnation, particularly from the U.S. and EU, who have responded with certain restrictive measures discussed below.
The situation is dynamic and we anticipate further steps will be taken in the days and weeks ahead.
The new Executive Order
On October 14, 2019, President Trump issued a new Executive Order (the “EO”) blocking property and suspending entry of certain persons contributing to the situation in Syria. Thereafter, the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) imposed blocking sanctions on the Republic of Turkey Ministry of Energy and Natural Resources and the Republic of Turkey Ministry of National Defense, as well as the ministers of Energy and Natural Resources, National Defense, and the Interior. This comes just eight days after President Trump announced that American troops would withdraw from northern Syria.
Under this EO, the Secretary of Treasury is authorized to block the property of any person determined:
- to be responsible for or complicity in, or to have directly or indirectly engaged in, or attempted to engage in actions or policies that further threaten the peace, security, stability, or territorial integrity of Syria OR the commission of serious human rights abuse;
- to be a current or former official of the Government of Turkey;
- to operate in such sectors of the Turkish economy as may be determined; or
- to be owned or controlled by or to have acted for or on behalf of, directly, or indirectly, any person whose property and interests in property are blocked pursuant to this order.
U.S. persons are prohibited from engaging in virtually all transactions with persons and entities whose property has been blocked, unless an exception applies. Additionally, pursuant to the new EO, non-U.S. persons will be exposed to a risk of sanctions if they engage in certain transactions with persons or entities who have been “blocked” under this EO. Specifically, the Secretary of Treasury can impose blocking sanctions on non-U.S. persons who are determined to have materially assisted, sponsored or provided financial, material or technological support for, or goods or services to or in support of, any person or entity blocked under the EO. Additionally, sanctions can be imposed on foreign financial institutions who are determined to have knowingly conducted or facilitated any significant transaction for or on behalf of certain blocked persons or entities.
Additionally, the Secretary of State is now authorised to impose a range of sanctions on foreign persons who are responsible for or complicit in, have directly or indirectly engaged in, or have attempted to engage in, or have financed any of the following:
- the obstruction, disruption, or prevention of a ceasefire in northern Syria;
- the intimidation or prevention of displaced persons from voluntarily returning to their places of residence in Syria;
- the forcible repatriation of persons or refugees to Syria; or
- the obstruction, disruption, or prevention of efforts to promote a political solution to the conflict in Syria.
The Secretary of State is also authorized to impose sanctions on:
- adult family members of a person who has been sanctioned pursuant to the aforementioned categories; and
- persons responsible for or complicit in, or who have directly or indirectly engaged in, or attempted to engage in the expropriation of property, for personal gain or political purposes in Syria.
Following President Trump’s issuance of the EO, the Secretary of Treasury imposed blocking sanctions on two Turkish ministries and Turkish ministers. Specifically, the Ministry of National Defense and Ministry of Energy and Natural Resources were designated for being a subdivision, agency or instrumentality of the Government of Turkey. Meanwhile, OFAC designated Hulusi Akar (Minister of National Defense), Suleyman Soylu (Minister of the Interior) and Fatih Donmez (Ministry of Energy and Natural Resources) for being current [or former] officials of the Government of Turkey.
As a result of these designations, U.S. persons are prohibited from engaging in virtually all transactions with the sanctioned ministers and ministries as well as entities of which they own 50 per cent or more. Additionally, non-U.S. persons will be exposed to a risk of sanctions if they engage in certain transactions with these persons and entities.
The general licenses
In conjunction with these designations, OFAC issued three general licenses:
- General License 1: General License 1 authorizes all transactions prohibited by Section 1, 2 and 3 of the EO that are for the official conduct of the United States Government by employees, grantees or contractors thereof.
- General License 2: General License 2 authorizes all transactions and activities prohibited by the EO that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements with the Ministry of National Defense or Ministry of Energy and Natural Resources that were in effect prior to October 14, 2019 until November 13, 2019. Notably, this General License does not authorize debiting accounts of a person blocked pursuant to the EO on the books of a U.S. financial institution.
- General License 3: General License 3 authorizes the United Nations, its Programmes and Funds, and its Specialized Agencies and Related Organizations to engage in all transactions and activities with the Ministry of Defense or the Ministry of Energy and Natural Resources that are prohibited pursuant to Sections 1, 2, and 3 of the EO.
For the EU’s part, the Council has urged Turkey to cease its military action in north-east Syria and to withdraw its forces. The EU has condemned Turkish action which “seriously undermines the stability and the security of the whole region, resulting in more civilians suffering and further displacement and severely hindering access to humanitarian assistance."
The EU has not yet imposed sanctions on Turkey but as a first step, appears determined to halt arms export licensing to Turkey on a member state level, pursuant to Common Position 2008/944/CFSP. Certain member states have reportedly already acted on this.
The EU has also agreed a framework of sanctions to counter Turkey’s “continued illegal drilling activities” for oil and gas in the eastern Mediterranean in the waters off Cyprus. While, ostensibly, this is unconnected with events in northern Syria, the timings cannot be considered a coincidence.
This is clearly a time of heightened tension between Turkey and, in particular, its NATO allies. So far, the sanctions imposed by the United States have followed a familiar pattern – the first wave is of relatively limited scope but with the necessary framework to expand quickly if no diplomatic solution is found. Likewise, we can expect the EU’s position to evolve over the coming weeks. Clients conducting business with Turkish interests should consider adopting enhanced due diligence processes and counterpart screenings to avoid acting contrary to the relevant sanctions regimes.